sph-8k_20180510.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15 (d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)

May 10, 2018

Commission File Number: 1-14222

 

SUBURBAN PROPANE PARTNERS, L.P.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

22-3410353

(State or Other Jurisdiction

 

(IRS Employer

of Incorporation)

 

Identification No.)

 

240 Route 10 West

Whippany, New Jersey 07981

(973) 887-5300

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

 

 


 

ITEM 2.02.  RESULTS OF OPERATIONS AND FINANCIAL CONDITION

The following information, including Exhibit 99.1 attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

On May 10, 2018, the Partnership issued a press release (the “Press Release”) describing its Fiscal 2018 Second Quarter Financial Results. A copy of the Press Release has been furnished as Exhibit 99.1 to this Current Report.

Within the Press Release, we reference net income before deducting interest expense, income taxes, depreciation and amortization (“EBITDA”) which is considered a non-GAAP financial measure.  Additionally, we discuss EBITDA excluding the unrealized net gain or loss from mark-to-market activity for derivative instruments and certain other items (“Adjusted EBITDA”). Our calculations of EBITDA and Adjusted EBITDA are presented in the Press Release furnished as Exhibit 99.1 to this Current Report.

We provide these non-GAAP financial measures because we believe that they provide the investment community with supplemental measures of operating performance.  In addition, we believe that these non-GAAP financial measures provide useful information to investors and industry analysts to evaluate our operating results.  

We also reference gross margins, computed as revenues less cost of products sold as those amounts are reported on the consolidated financial statements. Since cost of products sold does not include depreciation and amortization expense, the gross margin we reference is considered a non-GAAP financial measure.  Given the nature of our business, the level of profitability in the retail propane, fuel oil, and natural gas and electricity businesses is largely dependent on the difference between retail sales price and product cost.  Therefore, we discuss gross margins in order to provide investors and industry analysts with useful information to facilitate their understanding of the impact of the commodity prices on profitability.

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS

(d) Exhibits.

 

99.1

 

Press Release of Suburban Propane Partners, L.P. dated May 10, 2018, describing the Fiscal 2018 Second Quarter Financial Results.

 


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

May 10, 2018

 

SUBURBAN PROPANE PARTNERS, L.P.

 

 

 

 

 

 

 

By:

 

/s/ MICHAEL A. KUGLIN

 

 

Name:

 

Michael A. Kuglin

 

 

Title:

 

Chief Financial Officer & Chief Accounting Officer

 

 

sph-ex991_6.htm

Exhibit 99.1

 

 

 

 

 

 

News Release

Contact: Michael A. Kuglin

Chief Financial Officer & Chief Accounting Officer

P.O. Box 206, Whippany, NJ 07981-0206

Phone: 973-503-9252

 

FOR IMMEDIATE RELEASE

 

Suburban Propane Partners, L.P.

Announces Second Quarter Earnings

 

Whippany, New Jersey, May 10, 2018 -- Suburban Propane Partners, L.P. (NYSE:SPH), a nationwide distributor of propane, fuel oil and related products and services, as well as a marketer of natural gas and electricity, today announced earnings for its second quarter ended March 31, 2018.

Net income for the second quarter of fiscal 2018 was $106.8 million, or $1.74 per Common Unit, compared to net income of $83.8 million, or $1.37 per Common Unit, in the prior year second quarter.  

Net income and earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the second quarters of fiscal 2018 and 2017 included unrealized (non-cash) mark-to-market adjustments on derivative instruments in both periods; and the second quarter of fiscal 2017 included a loss on debt extinguishment of $1.6 million.  Excluding the effect of the foregoing items, Adjusted EBITDA (as defined and reconciled below) increased $24.1 million, or 17.5%, to $162.1 million for the second quarter of fiscal 2018, compared to $138.0 million in the prior year second quarter.

In announcing these results, President and Chief Executive Officer Michael A. Stivala said, “We are very pleased to report an improvement of $24.1 million, or 17.5%, in Adjusted EBITDA for the second quarter of fiscal 2018 compared to the prior year.  In a quarter that presented some extreme weather variability, our volumes increased more than 10% over the prior year.  Our people were well prepared to meet the increase in weather-related customer demand – delivering outstanding service to the customers and communities we serve, while maintaining their focus on managing costs and driving efficiencies.”

Mr. Stivala continued, “As we indicated at the start of this fiscal year, we developed our business plans for fiscal 2018 based on customer demand expectations assuming a weather pattern reflective of average heating degree days over the prior 10 years. Now that we are through the first half of fiscal 2018, we experienced weather that was in line with that 10-year average, albeit 7% warmer than normal (based on average heating degree days over the prior 30 years), and our volumes responded accordingly.  We are also making significant strides in our stated goal to restore our financial strength following the past two consecutive years of record warm temperatures. With the improvement in earnings and cash flows, our distribution coverage has increased, we have reduced indebtedness this quarter and our leverage metrics have meaningfully improved.”  

Retail propane gallons sold in the second quarter of fiscal 2018 were 169.7 million gallons, representing an increase of 15.8 million gallons, or 10.3%, compared to the prior year second quarter.  Sales of fuel oil and other refined fuels of 13.6 million gallons in the second quarter of fiscal 2018 increased 5.0% compared to the prior year second quarter.  According to the National Oceanic and Atmospheric Administration, average temperatures (as measured by heating degree days) across all of the Partnership’s service territories for the second quarter of fiscal 2018 were 6% warmer than normal, and 9% cooler than the prior year second quarter.  The heating degree days for the quarter were concentrated in January and March as average temperatures for those months were at or near normal.  However, average temperatures for the month of February were 16% warmer than normal and only slightly cooler than the record warm temperatures in February 2017.  

 

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Revenues in the second quarter of fiscal 2018 of $536.3 million increased $85.7 million, or 19.0%, compared to the prior year second quarter, primarily due to higher volumes sold, coupled with higher retail selling prices associated with higher wholesale product costs.  Average posted propane prices (basis Mont Belvieu, Texas) and fuel oil prices were 18.0% and 23.4% higher than the prior year second quarter, respectively.  Cost of products sold for the second quarter of fiscal 2018 of $246.6 million increased $54.2 million, or 28.1%, compared to $192.5 million in the prior year, primarily due to higher volumes sold and higher wholesale product costs.  Cost of products sold included a $3.7 million unrealized (non-cash) loss attributable to the mark-to-market adjustment for derivative instruments used in risk management activities, compared to a $2.5 million unrealized (non-cash) loss in the prior year second quarter.  These unrealized losses were excluded from Adjusted EBITDA for both periods in the table below.

Combined operating and general and administrative expenses of $131.2 million for the second quarter of fiscal 2018 increased $8.6 million, or 7.0%, compared to the prior year second quarter, primarily due to higher variable operating costs to support higher demand, and higher variable compensation expense associated with higher earnings.    

Depreciation and amortization expense of $32.2 million decreased $0.5 million, or 1.4%, compared to the prior year second quarter.  Net interest expense of $19.4 million increased $1.9 million, or 11.0%, compared to the prior year second quarter, primarily due to a higher level of outstanding borrowings under the revolving credit facility.  During the second quarter of fiscal 2018, the Partnership repaid approximately $36.0 million under its revolver from operating cash flows, which reduced outstanding revolver borrowings to $174.0 million at the end of the second quarter.  The increase in Adjusted EBITDA and the debt repayment during the second quarter resulted in the Partnership’s Consolidated Leverage Ratio improving to 4.58x as of March 2018.

As previously announced on April 26, 2018, the Partnership’s Board of Supervisors had declared a quarterly distribution of $0.60 per Common Unit for the three months ended March 31, 2018.  On an annualized basis, this distribution rate equates to $2.40 per Common Unit. The distribution is payable on May 15, 2018 to Common Unitholders of record as of May 8, 2018.

Suburban Propane Partners, L.P. is a publicly traded master limited partnership listed on the New York Stock Exchange. Headquartered in Whippany, New Jersey, Suburban has been in the customer service business since 1928. The Partnership serves the energy needs of approximately 1.0 million residential, commercial, industrial and agricultural customers through 668 locations in 41 states.

This press release contains certain forward-looking statements relating to future business expectations and financial condition and results of operations of the Partnership, based on management’s current good faith expectations and beliefs concerning future developments.  These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those discussed or implied in such forward-looking statements, including the following:

  

The impact of weather conditions on the demand for propane, fuel oil and other refined fuels, natural gas and electricity;

Volatility in the unit cost of propane, fuel oil and other refined fuels, natural gas and electricity, the impact of the Partnership’s hedging and risk management activities, and the adverse impact of price increases on volumes as a result of customer conservation;

The ability of the Partnership to compete with other suppliers of propane, fuel oil and other energy sources;

The impact on the price and supply of propane, fuel oil and other refined fuels from the political, military or economic instability of the oil producing nations, global terrorism and other general economic conditions;

The ability of the Partnership to acquire sufficient volumes of, and the costs to the Partnership of acquiring, transporting and storing, propane, fuel oil and other refined fuels;

The ability of the Partnership to acquire and maintain reliable transportation for its propane, fuel oil and other refined fuels;

The ability of the Partnership to retain customers or acquire new customers;

The impact of customer conservation, energy efficiency and technology advances on the demand for propane, fuel oil and other refined fuels, natural gas and electricity;

The ability of management to continue to control expenses;

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The impact of changes in applicable statutes and government regulations, or their interpretations, including those relating to the environment and climate change, derivative instruments and other regulatory developments on the Partnership’s business;

The impact of changes in tax laws that could adversely affect the tax treatment of the Partnership for income tax purposes;

The impact of legal proceedings on the Partnership’s business;  

The impact of operating hazards that could adversely affect the Partnership’s operating results to the extent not covered by insurance;

The Partnership’s ability to make strategic acquisitions and successfully integrate them;

The impact of current conditions in the global capital and credit markets, and general economic pressures;

The operating, legal and regulatory risks the Partnership may face; and

Other risks referenced from time to time in filings with the Securities and Exchange Commission (“SEC”) and those factors listed or incorporated by reference into the Partnership’s Annual Report under “Risk Factors.”  

 

Some of these risks and uncertainties are discussed in more detail in the Partnership’s Annual Report on Form 10-K for its fiscal year ended September 30, 2017 and other periodic reports filed with the SEC.  Readers are cautioned not to place undue reliance on forward-looking statements, which reflect management’s view only as of the date made. The Partnership undertakes no obligation to update any forward-looking statement, except as otherwise required by law.  

 

# # #

3


Suburban Propane Partners, L.P. and Subsidiaries

Consolidated Statements of Operations

For the Three and Six Months Ended March 31, 2018 and March 25, 2017

(in thousands, except per unit amounts)

(unaudited)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

March 31, 2018

 

 

March 25, 2017

 

 

March 31, 2018

 

 

March 25, 2017

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Propane

 

$

462,814

 

 

$

385,654

 

 

$

784,944

 

 

$

655,113

 

Fuel oil and refined fuels

 

 

41,699

 

 

 

34,630

 

 

 

67,014

 

 

 

56,726

 

Natural gas and electricity

 

 

20,392

 

 

 

19,239

 

 

 

33,539

 

 

 

32,306

 

All other

 

 

11,377

 

 

 

11,055

 

 

 

24,062

 

 

 

23,740

 

 

 

 

536,282

 

 

 

450,578

 

 

 

909,559

 

 

 

767,885

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of products sold

 

 

246,642

 

 

 

192,467

 

 

 

411,831

 

 

 

310,632

 

Operating

 

 

113,002

 

 

 

110,420

 

 

 

212,613

 

 

 

209,769

 

General and administrative

 

 

18,205

 

 

 

12,164

 

 

 

34,980

 

 

 

27,211

 

Depreciation and amortization

 

 

32,203

 

 

 

32,670

 

 

 

63,334

 

 

 

63,931

 

 

 

 

410,052

 

 

 

347,721

 

 

 

722,758

 

 

 

611,543

 

Loss on sale of business

 

 

 

 

 

 

 

 

4,823

 

 

 

 

Operating income

 

 

126,230

 

 

 

102,857

 

 

 

181,978

 

 

 

156,342

 

Loss on debt extinguishment

 

 

 

 

 

1,567

 

 

 

 

 

 

1,567

 

Interest expense, net

 

 

19,402

 

 

 

17,487

 

 

 

38,916

 

 

 

36,318

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before provision for (benefit from) income taxes

 

 

106,828

 

 

 

83,803

 

 

 

143,062

 

 

 

118,457

 

Provision for (benefit from) income taxes

 

 

41

 

 

 

(9

)

 

 

(893

)

 

 

156

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

106,787

 

 

$

83,812

 

 

$

143,955

 

 

$

118,301

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per Common Unit - basic

 

$

1.74

 

 

$

1.37

 

 

$

2.34

 

 

$

1.94

 

Weighted average number of Common Units

outstanding - basic

 

 

61,463

 

 

 

61,203

 

 

 

61,391

 

 

 

61,127

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per Common Unit - diluted

 

$

1.73

 

 

$

1.36

 

 

$

2.33

 

 

$

1.93

 

Weighted average number of Common Units

outstanding - diluted

 

 

61,793

 

 

 

61,503

 

 

 

61,688

 

 

 

61,386

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental Information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA (a)

 

$

158,433

 

 

$

133,960

 

 

$

245,312

 

 

$

218,706

 

Adjusted EBITDA (a)

 

$

162,129

 

 

$

138,039

 

 

$

255,362

 

 

$

222,326

 

Retail gallons sold:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Propane

 

 

169,724

 

 

 

153,875

 

 

 

294,710

 

 

 

272,476

 

Refined fuels

 

 

13,645

 

 

 

12,996

 

 

 

22,767

 

 

 

22,008

 

Capital expenditures:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maintenance

 

$

3,927

 

 

$

3,012

 

 

$

7,886

 

 

$

6,130

 

Growth

 

$

5,727

 

 

$

7,365

 

 

$

10,267

 

 

$

11,075

 

(more)

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(a)

EBITDA represents net income before deducting interest expense, income taxes, depreciation and amortization. Adjusted EBITDA represents EBITDA excluding the unrealized net gain or loss on mark-to-market activity for derivative instruments and other items, as applicable, as provided in the table below. Our management uses EBITDA and Adjusted EBITDA as supplemental measures of operating performance and we are including them because we believe that they provide our investors and industry analysts with additional information that we determined is useful to evaluate our operating results.

EBITDA and Adjusted EBITDA are not recognized terms under accounting principles generally accepted in the United States of America (“US GAAP”) and should not be considered as an alternative to net income or net cash provided by operating activities determined in accordance with US GAAP.  Because EBITDA and Adjusted EBITDA as determined by us excludes some, but not all, items that affect net income, they may not be comparable to EBITDA and Adjusted EBITDA or similarly titled measures used by other companies.

 

The following table sets forth our calculations of EBITDA and Adjusted EBITDA:

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

March 31, 2018

 

 

March 25, 2017

 

 

March 31, 2018

 

 

March 25, 2017

 

Net income

 

$

106,787

 

 

$

83,812

 

 

$

143,955

 

 

$

118,301

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for (benefit from) income taxes

 

 

41

 

 

 

(9

)

 

 

(893

)

 

 

156

 

Interest expense, net

 

 

19,402

 

 

 

17,487

 

 

 

38,916

 

 

 

36,318

 

Depreciation and amortization

 

 

32,203

 

 

 

32,670

 

 

 

63,334

 

 

 

63,931

 

EBITDA

 

 

158,433

 

 

 

133,960

 

 

 

245,312

 

 

 

218,706

 

Unrealized (non-cash) losses on changes in

   fair value of derivatives

 

 

3,696

 

 

 

2,512

 

 

 

5,227

 

 

 

2,053

 

Loss on debt extinguishment

 

 

 

 

 

1,567

 

 

 

 

 

 

1,567

 

Loss on sale of business

 

 

 

 

 

 

 

 

4,823

 

 

 

 

Adjusted EBITDA

 

$

162,129

 

 

$

138,039

 

 

$

255,362

 

 

$

222,326

 

 

The unaudited financial information included in this document is intended only as a summary provided for your convenience, and should be read in conjunction with the complete consolidated financial statements of the Partnership (including the Notes thereto, which set forth important information) contained in its Quarterly Report on Form 10-Q to be filed by the Partnership with the United States Securities and Exchange Commission ("SEC").  Such report, once filed, will be available on the public EDGAR electronic filing system maintained by the SEC.

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